Tax Efficient Investment
As Accountants North London I think Premium Bonds should be on the list of potential savings plans.
What triggered this post is that from 1st June 2014 the amount you can hold in Premium Bonds has increased by 33% to £40,000. And, the limit is set to increase further to £50,000 from 1st April 2015.
Premium Bonds are offered by NS&I (National Savings and Investments) which is an executive agency of the Chancellor of the Exchequer.
The bonds do not pay any interest; instead they offer tax free winnings on monthly draws. The prize fund is split into three value bands – higher, medium and lower. A percentage of the fund is allocated to each band.
The jackpot is £1m and from 1st August 2014 there will be two winners. The chance of winning between £25 and £1m is 26,000 to one.
With interest rates on investments being so low, and two jackpot prizes a month from 1st August 2014, it can be argued that now is a good time to hold Premium Bonds. If not for you personally, then perhaps you could start savings for your children or grandchildren.
You can check if you have one on the Website or by downloading the Prize Checker App. There is no lock-in, minimum/notice period or fees/penalties. You can cash in online, by phone or by post.
One thing worth noting is that Premium Bonds count towards the value of your estate for Inheritance Tax purposes.
Disclaimer – Sackmans is not regulated to give investment advice. This article focusses on the tax benefits of Premium Bonds.